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In line with the activities of the European Institutions, Brussels Brief will be suspended over the summer period. The next issue will be published on Friday 8 September 2006.
The European Commission has sent a new Statement of Objections (SO) to the banking group, ‘Groupement des Cartes Bancaires’ (GCB). In this new SO, the Commission takes the preliminary view that GCB has restricted competition between member banks by adopting tariffs which hinder the issuing of cards by new entrants in the group at a reduced price, thereby preserving the revenues and market shares of incumbent banks to the detriment of consumers. In an earlier SO, the Commission had taken the view that the tariffs constituted an agreement between nine of the largest French banks which were members of the GCB. The new SO, however, is addressed to the GCB alone, as the Commission now has reason to believe that the tariffs were set by a decision of the GCB, acting as an association of undertakings, and not by an agreement between the member banks themselves. The Commission has therefore closed the case against the nine French banks.
VAT: Reduced Rates for Labour-Intensive Services
The European Commission has issued a proposal which would allow EU Member States to assess a reduced VAT rate on specified labour-intensive services until the end of 2010. The proposal, which implements Directive 2006/18/EC, covers services such as home renovation, hairdressing, window-cleaning and other domestic and minor repair services. The proposal would apply to Member States currently levying a reduced VAT rate on labour-intensive services, as well as Member States wishing to do so for the first time. The Commission will also launch an independent study analysing the effects of applying a reduced VAT rate to labour-intensive services, focusing on economic activity, employment and the general economic condition of the internal market. The results of the study are expected in 2007. See Brussels Brief of 10 February 2006.
Public Procurement: Commission Guidance on Awarding Low-Value Contracts
The European Commission has published an “Interpretative Communication” on the Community law applicable to contract awards not, or not fully, subject to the provisions of the Public Procurement Directives. The Communication refers to two types of contracts: (i) low-value contracts with cross-border effect not covered by the Directives; and (ii) service contracts such as health and legal services contracts, for which the Directives only provide a limited number of rules. The Commission has drawn on existing case law of the European Court of Justice (ECJ) in developing minimum standards of transparency and non-discrimination for the award of these contracts. In particular, the Communication contains guidelines to public authorities for adequate and transparent advertising, awarding a contract under a fair and impartial procedure and the possibility to review the impartiality of the procedures. Although the guidelines do not create legal obligations for Member State authorities, Member States will have to take them into account in awarding public contracts.
Mergers: Commission Clears Alcatel-Lucent Merger
The European Commission has cleared the merger between the French company Alcatel and the US company Lucent. Both firms are active in the supply of telecommunications equipment and related services to operators of communications networks. The Commission found that the main competitive impact of this merger would be on the supply of (i) optical networking equipment; and (ii) broadband access network. However, the market investigation showed that even if the combined entity would have considerable market shares in these markets, the operation would not limit competition, as a number of viable competitors would still be present and customers would possess considerable market power, thus restraining the competitive behaviour of the new company.
Air Transport: Commission to Investigate Public Service Obligations on Routes to Sardinia
The European Commission has opened a formal investigation into Italian public service obligations concerning 16 air routes between three Sardinian airports and important airports on the Italian mainland. The Commission considers that the Italian rules may impose undue obligations on the carriers operating these routes and questions the way that the routes are shared between three operators, namely Air One, Alitalia and Meridiana. Finally, the Commission is concerned about reduced fares applied to passengers born in Sardinia even if they are not residents of the island.
Taxation: Belgium to End Discriminatory Tax Deductions for Residents with Foreign Income
Contact Philip Bentley
The European Commission has sent Belgium a formal request to amend legislation which discriminates against Belgian residents with both Belgian and foreign income. The legislation uses the ‘exemption with progression’ method. Where a double tax Convention is applicable, foreign source income is exempt from tax, but such foreign source income is taken into account in determining the rate of tax to be applied to the taxpayers’ Belgian source income. This leads to a limited deduction of personal and family allowances in such cases. On the basis of De Groot, a European Court of Justice (ECJ) decision regarding identical rules in the Netherlands, the Commission considers that the Belgian legislation contravenes the free movement provisions of the EC Treaty. If Belgium does not respond satisfactorily to the Commission’s request within two months, the Commission may refer the matter to the ECJ.
State Aid: Investigation into Extension of Preferential Electricity Tariff in Italy
The European Commission has opened an in-depth investigation to establish whether an extension of the regulated preferential electricity tariff granted by Italy to four Italian companies complies with EC Treaty State aid rules. The companies are Thyssen-Krupp Acciai Speciali Terni, Cementir, Nuova Terni Industria Chimica and Alcoa. They are currently receiving compensation from the ‘Cassa Conguaglio del Mercato Elettrico’, a State fund, that is equivalent to the difference between the market price of electricity and the preferential tariff. The Commission has doubts about the compatibility of the aid with the very strict conditions set out in the regional aid guidelines for assisted areas. In particular, the Commission observes that many of the factories receiving the preferential tariff are located outside the areas eligible for regional aid of this type.
Taxation: Belgium to End Discrimination in Flemish Property Registration Tax
The European Commission has sent Belgium a formal request to end discrimination in the Flemish property registration tax. On the purchase of a house, Flanders deducts from the registration tax the amount of the registration tax paid earlier on another house, provided it was in Flanders. Registration tax paid elsewhere in Belgium or in other Member States is not credited. The refusal to give credit for foreign tax prevents citizens from moving to Flanders and from purchasing properties there. The Commission considers that the Flemish rule is contrary to the EC Treaty. If Belgium does not reply satisfactorily to the Commission’s request within two months, the Commission may refer the matter to the European Court of Justice.
NEXT WEEK’S EVENTS
Monday 31 July – Friday 4 August 2006
No meetings scheduled for next week
COURT OF JUSTICE
Judicial vacation of the Court of Justice from 17 July – 3 September 2006 inclusive
COURT OF FIRST INSTANCE
Judicial vacation of the Court of First Instance from 17 July – 3 September 2006 inclusive